Tax Changes Affecting Short Sales

Underwater with your mortgage?

Over the past few years, one solution for homeowners in this situation, has been the short sale.  In these cases homeowners, owing more on their house than it's worth on the open market, can sell their home at market value, and in some cases, the lender would forgive the remaining balance.  

For example, let's say someone owes $250K on a home in Marlborough, MA. But the home is worth only $200K.  In a short sale, the owner sells the home for $200K, and the bank forgives the $50K balance.  

Short sales will hurt someone's credit, but not nearly as much as allowing a home to go into foreclosure.  

Going forward, however, homeowners need to think carefully about this option because the the tax implications that can occur as a result.  The $50K forgiven by the banks, in the above example, is considered taxable income.  

Oeer the past couple of years, the Mortgage Debt Relief Act exempted homeownes from this tax liability.  But, as this article from John Saari points out, short sale sellers will no longer be eligible for this tax exemption now that the Mortgage Debt Relief Act has expired.  

Underwater in Your Mortgage?  Click here to read this article.  

Click here for more information about Marlborough Mass Real Estate.  

John P.Kreiss,REALTOR®,CBR®,SRES®,e-PRO®
Certified Real Estate Divorce Specialist
Prudential Prime Properties
125 Turnpike Rd. #7
Westborough, MA 01581
Direct: (508) 826-6920
Fax; (508) 329-1303
http://www.marlboroughmassrealestate.com

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